Spring has sprung, and with it, the farmers are reporting earnings once again. Yesterday, we previewed the news due out from Delta & PineLand
What analysts say:
- Buy, sell, or waffle? Ten analysts track Monsanto, but most of them do so from the fence. Only two venture forth with buy ratings; one more says "sell."
- Revenues. The analysts expect to see sales grow 17% year over year to $2.2 billion.
- Earnings. Profits should come in a bit lower, with projections calling for a 10% increase to $1.52 per share.
What management says:
In reviewing its fiscal Q1 2006 results back in January, Monsanto CEO Hugh Grant (no, the other one) commented as follows: "The contribution of our seeds and traits business continues to grow. . Stronger adoption of our traits in Australia, coupled with stronger and earlier sales of Roundup herbicides and the addition of the Seminis business, helped make this a record first quarter for our company. . [W]e believe we are on track for another strong fiscal year for our business."
What management does:
Although the winter quarter isn't exactly the strongest for agriculture, Monsanto's rolling numbers support Grant's assessment of the business. Over the past 18 months, the company has managed to grow its gross margins 60 basis points and to pass 40 of those all the way down to the bottom line.
|
Margins % |
8/04 |
11/04 |
2/05 |
5/05 |
8/05 |
11/05 |
|---|---|---|---|---|---|---|
|
Gross |
47.2 |
47.4 |
48.4 |
48.4 |
48.1 |
47.8 |
|
Op. |
14.6 |
15.4 |
18.3 |
19.2 |
16.1 |
15.4 |
|
Net |
4.9 |
5.9 |
9.2 |
5.4 |
4.1 |
5.3 |
One Fool says:
So Monsanto has a strong past. The question for investors is whether it can sustain that strength in the future. In this regard, my fellow Fool Stephen Simpson, who reviewed the company's results last quarter, noted: "Monsanto has a very strong pipeline of products in grains and legumes (including traits for better herbicide tolerance and better drought resistance) and the opportunity to do a lot more in fruits and vegetables."
Combine the company's past success in the "stuff that grows" side of the business, its products due to come to market in the future, and the unarguable popularity of Monsanto's Roundup and similar "stuff that kills," and Monsanto does indeed seem well positioned.
Competitors:
In addition to Delta, which is as much a customer as a competitor, Monsanto's rivals include:
- DuPont
(NYSE:DD) - Dow
(NYSE:DOW) , a Motley Fool Income Investor recommendation - Syngenta
(NYSE:SYT)
Fool contributorRich Smithdoes not own shares of any company named above.